2014 (4) TMI 1248 - HC - Income Tax

Reopening of assessment u/s 147 - notice u/s 148 on expiry of four years from the end of relevant assessment year - exchange difference on PSCFC and PCFC loans - HELD THAT - We notice that in the instant case for A.Y 2006-07 the very issue has been raised though concluded not only in the earlier years but also in the original assessment on due scrutiny. In absence of any new tangible material available with the Assessing Officer on the basis of which he could form his belief that income chargeable to tax has escaped assessment it is not open to the AO to change his opinion by issuing the notice of re-assessment for the same being impermissible under the law. Revenue could not point out as to in what manner there has been a failure on the part of the assessee to disclose such material facts noted hereinabove. The reasons recorded itself also clearly indicates that from the verification of the record and on perusal of balance-sheet details of exchange difference have been noted leading to form a belief of escapement of income. From the very material available and in wake of this discussion we hold that the belief formed by the Assessing Officer is from the very record of the case and therefore the very assumption of the jurisdiction on the part of the AO in this case where the notice had been issued on expiry of four years period is not sustainable and therefore despite the contention on the part of the Revenue of availability of alternate remedy the interference at this stage is necessary. Notice of reopening deserves to be quashed and is hereby quashed therefor. We have recorded the objections raised by the petitioner for absence of deemed approval in accordance with law and though the same has been strongly resisted by the Revenue if chosen not to opine of this aspect as on the very first and vital ground we have quashed the notice for reopening. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice for reopening assessment under Section 148 of the Income-tax Act, 1961.
2. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.
3. Whether the reopening of assessment was based on new tangible material or merely a change of opinion.
4. Compliance with the procedural requirements for reopening beyond four years, including necessary approvals.

Detailed Analysis:

1. Validity of the notice for reopening assessment under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the notice of reopening issued on 22nd March 2013 for the A.Y 2006-07 under Section 148 of the Income-tax Act, 1961. The petitioner argued that the reopening was beyond the period of four years from the end of the relevant assessment year and that the issue had already been scrutinized in the original assessment. The court noted that the reopening notice was issued after the expiry of four years, which necessitates a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

2. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment:
The court examined whether the assessee had failed to disclose all material facts. It was found that the balance sheet and other details provided during the original assessment included the information regarding the foreign currency loans and exchange difference. The court concluded that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

3. Whether the reopening of assessment was based on new tangible material or merely a change of opinion:
The court scrutinized the reasons recorded by the Assessing Officer for reopening the assessment. It was observed that the Assessing Officer formed the belief of income escapement based on the information already available in the case record. The court held that the reopening was not based on any new tangible material but was merely a change of opinion, which is impermissible under the law for reopening an assessment.

4. Compliance with the procedural requirements for reopening beyond four years, including necessary approvals:
The petitioner contended that the approval for reopening should have come from the Joint Commissioner, as the Assessing Officer was of the rank of Assistant Commissioner. The Revenue argued that the approval was obtained from the Commissioner, which is in accordance with Section 151 of the Act. The court did not delve deeply into this procedural aspect as it quashed the reopening notice on the primary ground of lack of new tangible material and change of opinion.

Conclusion:
The court concluded that the reopening notice issued under Section 148 was invalid as it was based on a change of opinion and not on any new tangible material. The court quashed the notice for reopening the assessment for A.Y 2006-07. The petition was allowed, and no costs were ordered.